Myriad Genetics (MYGN) reported an EPS of 31 cents for the third quarter of fiscal 2011, beating the Zacks Consensus Estimate of 25 cents. However, the EPS was 6.1% lower compared to 33 cents in the year-ago period.

Revenues were $102.4 million, up 13% compared with the year-ago quarter’s $90.8 million and higher than the Zacks Consensus Estimate of $98.0 million. Despite a 13% growth in revenues, Myriad’s EPS was lower compared to the year-ago quarter due to a decline in interest income, higher income tax provision ($14.4 million compared with $1.2 million in the year-ago period), partially offset by a 9.6% decline in share count.

Myriad derives a majority of its revenues from Oncology, which increased 13.5% year over year to $73 million. Revenues from woman’s health grew 11% to $29.3 million. While Myriad markets several molecular diagnostic products, the company’s flagship product is Bracanalysis, which studies BRCA1 and BRCA2 genes for assessing woman’s risk of developing hereditary breast and ovarian cancers. This test recorded a 13.2% growth in revenues to $90.3 million. Moreover, revenues derived from Colaris and Colaris AP, which assess a patient’s risk of developing hereditary colorectal and uterine cancers, increased 7% to $7.4 million.

Gross profit (representing 89.1% of revenue) increased 3.6% year over year to $91.2 million. Operating expenses increased by 5.8% during the quarter to $49.4 million, due to a 4.7% rise in selling, general and administrative expenses ($42.7 million) while research and development (R&D) expenses increased 13.3% ($6.7 million). Despite the rise in operating expenses, operating margin increased 427 bps to reach 40.8%.

Myriad exited the quarter with cash and marketable securities of $451.5 million, up from $488.4 million at the end of June 2010. The company repurchased 4.5 million shares during the quarter. 


Based on a strong third quarter and the recent decision to acquire Texas based, privately-held Rules-Based Medicine (RBM), Myriad raised its outlook for fiscal 2011. The company now expects total revenue and EPS of $396−$402 million (previous guidance: $380−$400 million) and $1.06-$1.09 ($0.95-$1.00), respectively.


We consider Myriad’s Bracanalysis as a valuable asset for top line growth as it has the potential to tap a widely unexplored market. We are encouraged by the company’s various initiatives to attain this objective. Although the company’s molecular diagnostics business is performing well, any hiccup in the economic recovery could have a negative impact on patient sample volume. We also remain concerned about the tough competitive scenario in the biotechnology and genetics-testing field. With a strong cash balance, the company is well placed to expand its product portfolio and target new territories.

We have a ‘Neutral’ recommendation for the stock, which also corresponds to the Zacks #3 Rank (hold) in the short-term.

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